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AirTran, Jet Blue rank well in airline quality, study says

WASHINGTON - Low-cost carriers AirTran, Jet Blue and Southwest took the top three spots in a national survey of airline quality, while the industry overall hit its lowest rating in the nearly two decades of the study.

The poor ratings come at a time of rising fuel prices and increasingly fed-up consumers.

At the bottom of the list released Monday were Comair, American Eagle and in last place: Atlantic Southeast Airlines.

The past year "was the worst year ever for the U.S. airlines," said Brent Bowen, a study co-author and professor at the Aviation Institute at the University of Nebraska at Omaha. "Overall operational performance and quality declined once again to the lowest level that it's ever been."

The annual Airline Quality Rating survey found that more bags were lost, more passengers were bumped, more consumers complained and fewer flights arrived on time than in the previous year. The overall "quality score" the researchers gave the industry (-2.16) was the lowest in the nearly two decades they've been studying the airlines.

The survey comes at a difficult time for the industry given rising fuel prices, safety problems and bankruptcy troubles that shut down three carriers last week. ATA, Aloha Airlines and Skybus stopped flying because of financial pressures.

Major airlines also have slashed jobs while adding fees for second bags, traveling with pets and booking tickets by phone. And American, Southwest, Delta and United airlines have all had to cancel flights recently to perform safety inspections on some of their planes.

Last month, the Federal Aviation Administration hit Southwest with a $10.2 million civil penalty for missing safety inspections and then continuing to fly planes with passengers on board even after realizing the mistake. Early on, Southwest said it planned to appeal. More recently, however, the company has said it has requested an informal conference with the FAA to negotiate the penalty.

A trade group for the major U.S. carriers, the Air Transport Association, declined to comment on the airline report.

According to the study, the rate of consumer complaints was up 60 percent last year. US Airways had the most complaints. Southwest had the fewest. In all, complaints were up for 15 of the 16 airlines included in the study. Mesa Airlines was the exception.

About 37 percent of the complaints were for flight problems, including canceled or averted flights, said Dean Headley, an associate professor at Wichita State University and co-author of the study. About 20 percent of the complaints concerned baggage - stolen, lost or damaged. Another top complaint, at about 11 percent, was poor customer service.

On-time arrivals dropped for the fifth straight year, with more than one-quarter of all flights late, according to the survey. Southwest had the best on-time performance; Atlantic Southeast had the worst.

The rate of passengers bumped from overbooked flights also increased, up 13 percent. Jet Blue had the fewest bumped passengers; Atlantic Southeast had the most.

For lost bags, the industry overall had about seven mishandled bags for every 1,000 passengers - up from 6.5 in 2006. AirTran had the fewest mishandled bags, four for every 1,000 passengers. Headley said Air Tran's good showing helped propel the airline from the No. 3 spot in the 2006 rankings to No. 1 last year.

Among the study's other findings:

-More than one-third of Atlantic Southeast Airlines' flights were late, the worst on-time performance in 2007. The airline also bumped passengers more often, at a rate of 4.5 per 10,000 passengers.

-Jet Blue and AirTran were far ahead of their competitors in avoiding bumping passengers from flights, at 0.02 and 0.15 per 10,000 passengers, respectively.

The Airline Quality Rating study, compiled annually since 1991, is based on Transportation Department statistics for airlines that carry at least 1 percent of the passengers who flew domestically in the past year. The research is sponsored by the Aviation Institute at the University of Nebraska at Omaha and by Wichita State University.

SAN FRANCISCO - Brushing aside the threat of a disruptive takeover battle that could batter its shaky stock, Internet pioneer Yahoo Inc. on Monday reiterated its refusal to sell to Microsoft Corp. for less than $45 billion.

Yahoo's defiance, spelled out in a letter to Microsoft Chief Executive Steve Ballmer, marked the latest twist in a tug-of-war pitting two high-tech icons trying to mount a more formidable challenge to online search and advertising leader Google Inc.

The increasingly tense struggle now appears to have reached a turning point after more than two months of mostly behind-the-scenes maneuvering.

Analysts think the two rivals will either broker a friendly transaction before the end of the month or wrestle for the allegiance of Yahoo's shareholders in a showdown that could drag into the summer.

Most people following the saga still seem to think Microsoft - the world's richest tech company - holds the upper hand over Yahoo, which has been mired in a two-year slump and unable so far to find an alternative deal that would trump Microsoft's original offer of $44.6 billion, or $31 per share.

"They both have some leverage, but the greatest leverage still appears to rest with Microsoft," said Morton Pierce, a Washington, D.C., lawyer who advises on corporate mergers and acquisitions.

Ballmer turned up the heat up on Yahoo over the weekend by setting an April 26 deadline for the Sunnyvale-based company to accept Microsoft's offer.

Yahoo Chairman Roy Bostock and Chief Executive Jerry Yang, also a member of the company's board, fired back Monday in a letter that criticized Ballmer for not doing more to advance the negotiations.

Ballmer attended at least two of the informal meetings held between Microsoft and Yahoo, according to Bostock and Yang.

The letter didn't rule out further discussions as long as Ballmer is prepared to sweeten the unsolicited offer, which Yahoo first demanded in early February after its board unanimously concluded the bid wasn't high enough.

"We are steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value," Bostock and Yang told Ballmer.

Microsoft had no immediate response to the Yahoo letter.

The letter didn't specify how much Yahoo believes it's worth, but some analysts have estimated that Microsoft could afford to pay as much as $34 or $35 per share - about $50 billion - to end the impasse without further acrimony.

"Microsoft will raise the offer in the end," predicted Friedman, Billings, Ramsey & Co. analyst David Hilal. "This deal is too important to Microsoft for it to fail."

Other analysts doubt Microsoft will budge.

Microsoft's bid was 62 percent above Yahoo's market value when it was announced Feb. 1.

But the offer's value has declined since then because Microsoft wants to pay half the price with its own stock, which has declined by 11 percent since the Yahoo chase began.

Microsoft's stock price was unchanged Monday at $29.16 Monday. That left the value of Microsoft's bid at $29.36 per share, or about $42 billion.

If not for Microsoft's bid, many analysts believe Yahoo shares would be trading around $15 per share, based on the erosion of other high-tech stocks during the past two months. At $15 per share, Yahoo would have market value of about $21 billion.

Yahoo shares fell 66 cents to finish Monday at $27.70.

In their Monday letter, Bostock and Yang asserted Yahoo stockholders with significant stakes in the company agree Microsoft's bid isn't high enough, especially since the offer has declined by more than $2 billion.

Nevertheless, an analyst for an investment fund that owns Yahoo shares predicted it would be difficult to turn down Microsoft's offer if the bid goes to a stockholder vote. "Most shareholders are going to go with the bird in hand rather than risk losing money on the stock," said the analyst, who asked not to be named because he wasn't authorized to speak publicly.

If Microsoft takes its bid directly to shareholders, the vote would be held at Yahoo's annual meeting, which must be held by July 12.

The money manager of another investment fund that owns about 1 million Yahoo shares applauded the company for trying to fetch a higher bid, but wants a deal to be negotiated without further acrimony.

"Part of is a normal process, but I am also worried about too many egos getting in the way," said the manager, who wasn't authorized to speak publicly.

Most of Yahoo's major shareholders also own significant stakes in Microsoft. The cross-pollination means some Yahoo shareholders might to lose more money than they could make from a higher Microsoft bid if raising the offer causes Microsoft's stock to decline.

To protect the value of its stock, Microsoft might revise its offer so it consists of more stock, Hilal said. Throwing more cash on the table wouldn't hurt Microsoft's market value as much because the company wouldn't be undermining its earnings per share by issuing more stock.

After a long stretch of declining profits, Yahoo says it is on the verge of a turnaround that will become more evident in 2009 and 2010 as its Internet ad revenue accelerates.

Yahoo's optimistic forecasts so far haven't swayed Wall Street.

Yankee Group analyst Daniel Taylor thinks Yang and Yahoo's other directors are digging in their heels in hopes that they will get the chance to prove the skeptics are wrong.

"They want to be able to show the breadth and depth of what they have been trying to do all these months," Taylor said. "This battle is going to go right down to the wire."

Rate of consumer complaints per 100,000 passengers, according to the 2008 Airline Quality Rating survey by the Aviation Institute at the University of Nebraska at Omaha and Wichita State University. The study is based on Transportation Department statistics. The category covers complaints in 11 areas, including fares, ticketing, customer service, flight problems and animals.